Tuesday, October 18, 2011

Financial rant

I can tell when my general malaise is bubbling over. I tend to get inspired to write again. At least that's certainly the case this time. A bit of back story here: I complained about receiving my 401K statement the other day and that I'd lost 20% of it's value in 1 quarter. Most friends were on the same page feeling equally taken in the shorts with losses. A couple friends posted to stay the course and it'll get better and one friend in particular took some time to write out thoughtful responses on why I was still doing OK and that it shouldn't be considered a real loss at this time. I took issue with that and thought I'd do a better job of writing up a rant rather than crapping up a post.

The last comment that got me digging out the soap box was, "A real loss only happens if liquidated/sold. Your accumulated shares are showing less value at the time your statement was printed. There is a distinct difference. I guess you now own more shares/units than before. In my mind this is a gain in 'value'."

To my friend- don't take this personally, its just that this comment really bugs me. I suppose as long as you're still playing the game that could be considered true. It just means I haven't lost everything yet. I'll try to remember that next time I sit down at the blackjack table and the dealer is holding half my money. I mean, heck, I'm still playing the game, so as long as I don't get up and take my lumps, its still possible for me to get my money back and possibly even make some.

Here's my stance. This type of rose colored glasses are a big issue in my book when it comes to talking about personal finance. Its all great until its time to pay the piper. If I've lost money, tell me, I'm a big boy and can handle the truth. If I didn't want the risk, I'd bury my money in the back yard. Don't sell me on the fact that I'm missing the equivalent to a DI2 equipped Shiv from my account and that its all good because I can still buy 50 strider bikes right now. The stuff I've all ready purchased didn't suddenly cost me any less or multiply behind my back. If I stopped playing the game 3 months ago, I had that money. If I stopped today, I don't. It really doesn't matter if you're still playing, it matters where you're at all the time. A gain is a gain and a loss is a loss. Delaying talking about them until you've quit the game is only a delay.

Losing money sucks, no doubt about it, but people need to hear when they're ahead or behind flat out without smoke and mirrors to decide how much risk they want to continue to take. Obviously the long term trends show we'll eventually gain back our money and continue to grow our wealth or we'd all be suckers to keep going at it. I wholly understand that fact and will keep plugging away at trying to make wealth for myself in this manner as its an acceptable risk/reward scenario for me. Just don't tell me that ups and downs along the way don't suck or alternately aren't awesome. I don't need the smoke and mirrors to make it better, I need simple to understand terms. Honestly, I think most Americans could use the same type of thing.

Shit, I can't think of a good wrap up for this rant without dredging up 10 other things that are pissing me off so there you have it in a nutshell.

I have both scenarios going on in different investments. I don't differentiate much between house money and money I've put in the pot myself once a gain has been shown because the gain was still there and could have been realized. I realize my view is probably a bit more pessimistic than it should be, but I think a healthy dose of reality would do the average consumer good even if it isn't as dreary as my view.